Canada appears to be heading toward another — and potentially far more serious — economic shock.
This time, vis-à-vis energy shortages. The warning signs are already visible, following continued instability and conflict in the Middle East, where the Strait of Hormuz, the world’s most important oil transit chokepoint, has effectively been closed. Roughly one-in-five barrels of oil globally passes through this narrow corridor. Nearly all shipments have now stopped.
This disruption has already triggered significant energy market volatility and foreshadows a far deeper crisis should the closure persist. While we may hope this shock does not fully materialize, we must recognize the indicators suggesting we are on the brink of something far more severe. A crisis that could rival COVID-19’s economic fallout, though driven by different forces.
The effective closure of critical shipping routes has constrained oil supply and forced countries with strategic petroleum reserves to draw them down at an accelerated pace. The United States alone has withdrawn approximately 172 million barrels, nearly 40 per cent of its reserve, at a cost of roughly $20 billion. Replenishing those reserves will be extraordinarily expensive and those costs will inevitably echo through the global economy. We are already beginning to see the impact at the fuel pumps.
These costs will land hardest on consumers. Canadians are already contending with housing instability, persistent inflation and a high cost-of-living crisis. Over time, households have been conditioned into a mindset of precarity. A global energy shock risks pushing many from economic fragility into outright poverty.
Compounding the issue is the continued expansion of the money supply by governments at all levels. Despite clear inflationary pressures, there has been insufficient political will — and insufficient public demand — to reverse course.
The result is predictable: higher prices, diminished purchasing power, weakened consumer spending and a cascading slowdown and stagnation in economic activity. Fewer businesses are created by a shrinking class of entrepreneurs. This means fewer jobs for Canadians, especially youth where unemployment is particularly high.
So, with these bleak prospects, where does Canada stand as this crisis approaches?
Troublingly, Canada has no national strategic petroleum reserve, not a single barrel. In a world increasingly defined by geopolitical volatility and supply shocks, this is a structural vulnerability that places Canadians at disproportionate risk. Other nations spent decades building energy security frameworks to buffer against precisely these disruptions. Despite possessing some of the world’s most abundant natural resources, Canada did not.
Canadians are positioned yet again to pay the price.
The consequences will be immediate and tangible. Rising fuel costs will drive up transportation prices. Food, already strained by supply‑chain pressures, will become more expensive. Heating a home through a Canadian winter will impose an even heavier financial burden. For many, homeownership has already slipped out of reach. How many more families will give up on the promise of homeownership as they struggle to afford groceries and/or keep the heat on?
An energy crisis would also undercut Canada’s ambitions in emerging and strategic technologies. Our enthusiasm to “get AI right” cannot be separated from the physical realities that enable it.
Data centres cannot be built, or reliably operated, on an electricity system already strained by peak demand. If energy scarcity becomes normalized, Canada will fall behind. We cannot allow ourselves to face a choice between heating homes and advancing economic growth and innovation in AI. Canada cannot afford to get this wrong.
Given the high risk of an energy crisis, Canada can take steps-beyond rhetorical commitments and achieve energy security. If we want to be a sovereign, competitive and economically resilient country, we must deliver on building national projects. Our federal and provincial governments have been elected to get shovels in the ground. Public support for pipelines are in high majorities. Canada must strengthen energy security by advancing critical infrastructure and establishing strategic reserves to protect Canadians, Indigenous communities and our allies.
We must address chronic labour shortages by investing in domestic skills and building the workforce required to deliver national projects on time and on budget. And we must restore competitiveness by improving procurement, reducing unnecessary labour disruption and rebuilding trust between government, workers and industry.
These are not radical ideas. They are pragmatic, overdue and necessary. There is growing multi-partisan consensus on all these policies.
What is missing is urgency to deliver and a serious, honest national conversation about the risks we face and the choices before us. Governments may feel tempted to “wait and see” what happens with the strait.
Canadians must encourage our leadership to avoid this temptation and not only speak up until after prices spike further. Not after families are forced to choose between food, heat and shelter.
Supporting Canadians means confronting reality, planning responsibly and acting together — before this energy crisis becomes a reality.
Wellington Advocacy is a national public affairs firm. Benjamin Lamb serves clients through Wellington’s Ontario Business Line, specializing in labour advocacy.
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